Do You Know What Kind of Student Loan You Have? The Answer May Surprise You

Nearly 1 million students have taken out college loans and don’t understand what kind of loan they have, according to recent research.

In 2015, 3 million students ages 16 to 25 were enrolled in college by October, according to the Bureau of Labor Statistics.

A study conducted by researchers Elizabeth Akers and Matthew Chingos of the Brookings Institution found that 28 percent of students are not aware of the loans they are extracting, nor what kind of loans they are borrowing.

“Students are taking out debt blindly and find out when it’s too late what they’ve done and the pressure it imposes on their lives,” reports Gail MarksJarvis in the Chicago Tribune.

The study concluded that 62 percent of college freshman cannot fairly project or estimate their loans.

Both Sides of the Coin

Christina Fortini graduated from Grove City College in 2015 with a Bachelor of Arts in Communication and Visual Arts. Currently, Fortini is pursuing a Juris Doctorate Degree from Rutgers School of Law-Newark.

Unlike the majority of her peers, Fortini has experience the pros and cons of post-secondary insitutions being federally or privately funded.

“I think private institutions that wish to reject federal funding are smart to do so: it provides freedom in academia, which is essential to education,” said Fortini. “The freedom to privately instruct is what creates unique institutions, rather than cookie-cutter programs.”

However, Fortini has enjoyed some of the benefits of federally funded student loans at Rutgers.

“At Rutgers, I have an easier loan process, flexibility for future repayment options, opportunities for loan forgiveness and more funds available (i.e., for living expenses, for books, etc.),” said Fortini. “I also have more flexibility to increase my loan later if I find that I did not take out enough — with no penalties.”

Just Say No

Reflective of the motto Pro Christo et Libertate, “For Christ and Liberty,” three private colleges in the nation have publically announced their abstinence from federal funding: Grove City College, Hillsdale College, and Patrick Henry College.

Grove City College, a private liberal arts institution founded on the principles of faith and freedom, has rejected federal funding for years dating back to early 1980’s. The College’s philosophy behind this stance was formed by the founding board of trustees including Joseph Newton Pew (President of the Board of Trustees), Isaac S. Ketler (Founding President), and Samuel P. Harbison (Trustee).

Inscribed on a stained glass window at the College’s Harbison Chapel is a statement established by the founding board stating, “We dedicate this college to the development of sound scholarship and Christian character in all aspiring youth.”

Lee Wishing III, administrative director of The Center for Vision and Values, articulates Pew’s vision to remain federally free regardless of the increasing inflation rates of the economy.

“Despite the ever-present tension of providing a great education within affordable means, Grove City College from a business perspective has been and continues to be a remarkable place,” Wishing told Grove City College’s The Collegian.

Effect on the Rankings

Blake Neff of The Daily Caller identified a representative of the Obama administration who believes that post-secondary insitutions such as Hillsdale College and Grove City College do not belong on the administration’s new College Scorecard.

The Obama administration concluded that Hillsdale College specifically is absent from the scorecard because the association grants a significantly low number of degrees to its graduates.

But such a claim is inconsistent with the data. For example, Burlington College of Vermont, who made the scoreboard, awards students a considerably fewer degrees than Hillsdale College.

Coincidence or no coincidence, along with Hillsdale College, insitutions including Grove City College and Christendom College all have been rejected from the College Scorecard. What these insitutions all share in common is their belief in not accepting federal funding.

Yet the majority of college students today do not know the significance of that decision, nor do they know the difference between federal and private student loans.

Understanding the Difference

Federal Student Aid outlines major highlights between the different loan types. Federal loans are funded by the federal government and include benefits such as fixed interest rates. Contrarily, private student loans are nonfederal and issued by banks, credit unions, state agencies, or the schools themselves.

Grove City College along with Hillsdale College support the high level of accountability to which private student loans hold students. Along with requiring a cosigner, private student loans are not subsidized and entail the borrower to independently pay the interest rate.

“Although at first blush it may sound impossible to pay for college tuition without receiving government funding, GCC doesn’t play any games from the get-go and keeps tuition for a private, Christian school unbelievably low,” said Karolina Lagerquist, 2016 Grove City College graduate. “Thanks to private scholarship funding and decades of meticulous saving, I was able to afford GCC government-funding-free price tag with a good degree of manageability.”

The main revenue streams for private insitutions such as Grove City College originate from fundraising as well as student tuition and fees.

“Grove City College is driven towards exposing false perceptions of value and personal validations by offering students an academic experience where the integration of faith, learning and financial practice is ever so present,” Wishing told The Collegian.

The majority of public colleges and university are drawn towards the elasticity that comes with federal student loans. When students apply for federal student loans they are guaranteed tax deductions, flexibility with repayment plans, and are not obligated to have a cosigner.

“Universities depend heavily on federal funding, with many of the top programs relying on the government for more than 60 percent of their R&D budgets,” according 24/7 Wall St.

The average student loan debt of the Class of 2016 has increased 6 percent and is set at $37, 172 per student, according to Student Loan Hero.

It is crucial for students to not only understand the difference between federal and private student loans but also their school’s philosophy behind partaking or abstaining from federal funding.

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As a motivated individual with a passion for creative storytelling and quality content, Communication Studies has evidenced my ever growing love for news broadcast. At Grove City College, I excel as an honors student, radio director, and contributing writer for GCC’s newspaper, The Collegian.